Working for yourself can give you freedom as well as increase your income while letting you focus on doing what you love. But as wonderful as self-employment can be, there are plenty of pitfalls. There is a big difference between doing what you love as a hobby and doing it to make a living. When you make little money from your bobby, that’s welcomed extra income, which comes as part of the fun. But when you flip the switch and make your hobby your sole means of making a living, some of the fun vanishes, and sometimes all of it disappears if you are not able to make ends meet.
Working for somebody else is like renting an apartment, whereas working for yourself is like owning your home. Both have their rewards and drawbacks. Having to pay the mortgage and worry about house repairs is not the fun part of owning a home. In the same way, having to generate your own income can add a lot of stress to your life- you have to come up with a business plan, get premises, find customers, get financing, as well as pay the bills.
While there may be pressure working for somebody else, there is also a sense of comfort in knowing you will have a cheque at the end of each month, which makes your life less stressful. With a guaranteed salary, you are able to plan your expenses and savings. There is also the added benefit that you may not be the one making all the daily decisions or the one to worry about where the money to pay bills will come from. Plus, if you don’t like the job you can quit, while you can’t run away from your business.
Despite the downsides of owning your own business especially in getting started, it can be tremendously rewarding, both emotionally and monetarily. Research has established that self-employed people are more likely to have more money than those working for others. However, if you decide to make the leap into self-employment, you need to be careful, because if not well planned and executed it could be the biggest mistake you can make in your life, which may end up destabilising you completely. Take your time to do research to make sure you are going into the right business. Ensure you make smart choices, as that is the only way to guarantee your success. Do not go into business because a family member, colleague or friend has moved in that direction and they appear to be doing well.
Here are some things you need to keep in mind before jumping into self-employment:
1. Have a plan. Just as a budget is important for your personal finances, a business plan is key to entrepreneurial success. If your business is small, such as a vegetable kiosk, the plan can be as simple as a list of goals. But if you are looking for outside funding, say from a bank, to start a substantial business, your plan needs to be as detailed as possible. Nobody will advance you money if you don’t have projections that point at business success.
2. Find advisors you trust. A new business is uncharted territory, so it really helps to have guides along the way. Heed the advice of your mentors and those who have walked the path before you. Do not shy away from seeking advice; it does not mean you are ignorant or naïve about business. Find a good lawyer to help you set up a legal entity that can stand the test of time. You will also need an accountant to help you work out the business plan, and get you started in bookkeeping and other financial matters.
3• Play by the rules. Some small-business owners strike out on their own because they are mavericks. This independence may make them think they can cut corners by not filling out paper work, getting various licenses and business approvals, filing returns, or not paying taxes. Shortcuts like these put everything at risk. The city or municipal council, or Kenya Revenue Authority could close your business with the stroke of a pen and see you hurled to court where you may face hefty penalties. It is easier to do things right the first time than to sort out a mess later.
4• Keep business and personal accounts separate. Don’t mix business and personal funds. Open a business account separate from your personal account. Don’t use a business account as a personal account. If you need to pay yourself any allowance from the business or pay personal bills, do the necessary paperwork such as requisitions and then write out a cheque and deposit it to your account but don’t spend directly from a business account. Document everything that enters and leaves the business account. If you are in a cash business, it can be tempting to use cash to pay personal bills or replenish stocks instead of banking it in the business account and then expending it as it necessary. This is a dangerous route to go, as you will never know when your business is making a loss or a profit when you don’t follow proper accounting procedures.
5• Keep costs low. Do what you can to keep overheads down, especially when getting started. You can, for example, start with second hand furniture until you are able to buy new. Some people want to start a business in a big way even before they have an idea how the business will turn out. Starting small and growing is the way to success. You will be less stressed and have better odds of success if you don’t have a lot of bills dragging you down, or taking a big loan you may find difficult to service.
6• Be willing to spend money on training. Buy the books and manuals you need to learn more about your particular business and take classes where and when need arises. Also get as much information from the Internet as you possibly can. Training to equip you with skills to run your business efficiently is a necessary business expense, and not a luxury.
7• Keep good records. Business may be slow when you start and so it may not seem a big deal to keep proper records and a good filing system. But with time, as your business grows, you may be flooded with paperwork and if you had not established proper filing systems and routines right at the beginning it could bog you down. Get organised from the start to prevent future headaches.
8• Be confident. When you start out, don’t let your customers know you are nervous or not quite sure of what you are doing. Customers come to you because they need help and if you don’t exude confidence, they will not trust you. You should endeavor to guide them to the right product or service and when you don’t have an immediate answer, ask them to give you time to get back to them. Make sure you call back, as this creates trust. Do thorough research on your kind of business and ensure with time you become an expert. If you make mistakes, don’t beat yourself too hard or withdraw, instead learn from them and move on.
9. Charge the going rate. Some people think the way to get started in business and beat competition is to charge low to undercut them. If you are too cheap, people will think there is a reason for it – not many people trust cheap things. Charge the going rate and raise your price as demand increases. After all, there is a reason why those who have been there before you charge those rates. If you charge too low, you will not meet your costs and soon you will be out of business.
10• Attend entrepreneurial trainings. There are many training programmes to help entrepreneurs, many conducted by banks and micro finance organisations and other non-governmental organisations concerned with entrepreneurship and empowerment. Keep an eye on what is happening and take up every opportunity that comes along. The good thing is that most come at very little cost or no cost at all. Ask your bank if they have programmes that may help you. Some organisations also have mentorship programmes where experienced entrepreneurs are matched with starters. Don’t shy away from seeking help and advice when you need it. Your bank, financiers and other partners want you to succeed so you can become a bigger customer, so seek their help.
11• Have an exit strategy. You must start your business with a plan that states clearly where you are going and why. You must have clearly spelt out goals. Why are you in this business – Is it to make money, to keep you happy, or to allow you work half day leaving you time to pursue other interests? If your goals are not met, then you need to have an exit strategy because you should not continue pursuing a business that is not meeting your goals or fulfilling you in meaningful ways.